What just happened? eBay has rejected GameStop's $56 billion acquisition offer, and the company wasn't shy in detailing exactly why it decided to pass. In a strongly worded response sent to GameStop CEO Ryan Cohen, eBay's Board Chairman Paul S. Pressler said the offer was "neither credible nor attractive."
In the letter, which was also shared online, the executive said the board and its independent advisors thoroughly reviewed GameStop's proposal before making a decision.
Pressler said the review committee took into account numerous factors including eBay's standalone prospects, the uncertainty surrounding GameStop's financial proposal, the impact the deal would have on eBay's long-term growth and profitability, the operational risks and leadership structure of the combined entity, the implications of the deal on valuation, and GameStop's executive and governance incentives.
eBay isn't the only one that felt GameStop's offer was a bit ambitious. At the time of proposal, GameStop had a market value of around $12 billion compared to eBay's $46 billion valuation. GameStop offered $125 per share, split half and half between cash and GameStop stock. Shares in eBay were trading at around $104 prior to the offer, and sit at $108.18 as of this writing. GameStop's stock is down 1.25% on the news, trading at $22.88 as of writing.
GameStop said it intended to fund the offer using cash and liquid investments on its balance sheet combined with third-party financing. In reality, it's unclear if GameStop would have been able to secure the funds needed to make the deal happen.
Some investors, like Michael Burry, believe a deal would weigh down GameStop with debt and dilute shareholders.
It's unclear what might happen next. As CNBC highlights, GameStop's chief executive could take an offer directly to eBay shareholders if he wants to pursue the matter further.
eBay seems like an unusual fit for GameStop, but perhaps there are synergies to be realized. GameStop operates more than 600 physical retail stores in the US. If they could find a way to leverage those locations to help eBay, perhaps the combined entity could better challenge rivals like Amazon.